Sundance, which is developing the $US4.7 billion Mbalam iron ore project in Cameroon and the Republic of Congo, revealed yesterday that Hanlong had communicated its plan to make a conditional takeover bid for the company, a move foreshadowed in The Australian Financial Review’s Street Talk column in May.

The proposed offer price of 50¢ a share represents a 25 per cent premium to Sundance’s closing share price on Friday and a 45 per cent premium to its one-month volume- weighted average share price.

Sundance told shareholders yesterday to take no action in response to the Hanlong proposal and said the board did not consider the terms of the offer provided “adequate value or certainty" to shareholders.

However, the company said that it would engage with Hanlong to discuss the terms while also continuing negotiations with potential strategic partners for Mbalam.

Sundance chairman
George Jones
and chief executive Giulio Casello are expected to meet Hanlong representatives either in China or Sydney this week.

Sundance has been in talks with a number of parties about partnering on Mbalam, but members of the investment community have observed that a full takeover bid for the company might be more logical.

A JPMorgan director said in a May note: “Why would a Chinese player pay $US2 billion (50 per cent of Sundance’s net present value as per the feasibility study) for a 50 per cent stake when it could potentially acquire 100 per cent of the company for less?"

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Hanlong emerged as Sundance’s largest shareholder in March after paying $190.9 million for the 16 per cent stake held by the estate of mining entrepreneur
Ken Talbot
, who died in a Congo plane crash with four other directors last year.

The Chinese company, which was established in 2009 as the mining arm of Sichuan Hanlong Group, a conglomerate with interests varying from real estate to pharmaceuticals and industrial chemicals, now owns 18.6 per cent of the company. Aside from its stake in Sundance, Hanlong owns 57 per cent of Australian molybdenum and iron ore company Moly Mines, 12.5 per cent of US molybdenum company General Moly and 11.5 per cent of Australian uranium explorer Marenica Energy.

It submitted a $144 million takeover proposal for Namibian uranium explorer Bannerman Resources this month and last week Hanlong chairman, Australian businessman
Peter Mansell
, hinted that the company had more irons in the fire.

“Hanlong has made a number of investments in Australia’s resources sector and we intend continuing to be an active strategic investor in the sector," he said. “We are currently assessing opportunities across a range of commodities and stress that we see opportunities in the uranium sector beyond Bannerman."

Last November, Hanlong signed a co-operation agreement with the Export-Import Bank of China that would see it provided with loans of up to $US1.5 billion to fund overseas expansion.

In June this year, the company helped to arrange a $494 million project finance facility for Moly Mines’ Spinifex Ridge project in Western Australia through the China Development Bank.

Stage one of Mbalam is expected to comprise the construction of two mines capable of producing 35 million tonnes of hematite iron ore a year, a 500-kilometre railway and a deepwater port in Cameroon.